Fannie and Freddie Fight: Hedge Funds vs. Treasury

If the United States government winds up having to give up tens of millions to hedge funds invested in companies rescued with taxpayer funds, you can be sure there will be a good deal of populist outcry. But much of it will be misplaced, aimed not at the bureaucrats whose schemes set this motion in process, but at the hedge fund managers who took advantage of the bureaucrats’ short-sightedness.

The lawsuit filed Monday by Perry Capital, a hedge fund, argues that the government is taking too much of the profits of Fannie Mae and Freddie Mac, the failed mortgage giants. Perry, and a handful of other hedge funds, own preferred shares in the companies that they think should be worth not-so-small fortunes if only the government would stop hogging all the profits.